Senate Democrats attack “real lender” interest rate rule


Senate Democrats step up pressure on a federal banking regulator to abolish a Trump-era rule they say allows lenders to evade state interest rate limits and deceive vulnerable consumers .

In a hearing Wednesday, Democrats on the Senate Banking Committee said it was high time the Office of the Comptroller of the Currency (OCC) revoked its “real lender” rule.

The OCC finalized a rule in October intended to clarify who is the real lender of a loan made to a client in a partnership between a nationally chartered bank and a third party, usually a non-bank lender. A coalition of attorneys general from the Democratic states sued the OCC in January, arguing the rule violated federal consumer protection laws and the authority of the OCC.

“You can side with online payday lenders who brag about their creativity by avoiding the law and finding new ways to prey on workers and their families,” Sen said. Sherrod BrownSherrod Campbell Brown’s ‘Allies’ Biden Painting Him in a Corner JD Vance Appears as Wildcard in Ohio GOP Senate Primary McConnell Returns as Senate ‘Grim Reaper’ MORE (D-Ohio), chairman of the Senate Banking Committee, “or we can stand up for families and small businesses, as well as state attorneys general and state legislatures who have said ‘enough’.”

The rule was issued by former acting currency controller Brian Brooks, a Trump-appointed person who resigned shortly before President BidenJoe Biden WHO warns of third wave of continent-wide coronavirus infections in Africa 30 House Democrats urge Biden to do more for global vaccine distribution Manchin is not ready to back Democrats by passing the infrastructures by themselves PLUS to take place. But Biden has yet to appoint a full-time controller, allowing the rule to linger while interim controller Blake Paulson, a career OCC employee, oversees the agency.

In the absence of a person named by Biden who is likely to take control of the OCC soon, Democrats consider trying to repeal the real lender rule through a Congressional Review Act (CRA) resolution . The law allows the legislator to repeal regulations issued within a certain time frame and prohibit the agency from issuing a similar rule by passing a simple majority measure in each chamber.

Republicans, however, have made it clear that there will be little to no GOP support to repeal the real lender rule. They argued on Wednesday that the OCC measure would give banks and lenders clear legal guidelines that would help expand access to credit and warned Democrats against limiting those options.

“There is no doubt that we need to let everyone know their cheapest financing option. Count on me to do it, ”said the senator. Thom tillisThomas (Thom) Roland Tillis9 Senate seats most likely to tip over in 2022 North Carolina Senators call on governor to deny federal unemployment benefits GOP plays with Pelosi by opposing Jan. 6 commission MORE (RN.C.). “By removing this [rule] for today’s dads trying to get that short-term loan to put food on the tables of six kids? Count me out of it.

The real lender is supposed to establish national guidelines for partnerships between banks and third parties that are subject to different state interest rate limits. Under the OCC rule, the true lender of the loan is the party that is either listed as the true lender or is funding the loan.

Such partnerships can allow a financial company to offer a client a loan with a higher interest rate than that allowed by the laws of its state by partnering with a federally chartered bank headquartered in a State with a higher interest rate cap.

“I don’t consider interest to be a bad thing if I’m someone with credit problems and need a two-year personal loan to replace my roof or do one of the many things to do. which people use these loans, ”Brooks told lawmakers Wednesday.

“I don’t think it’s on me to say that’s a bad thing.”

Democrats and a coalition of church and consumer groups have countered that the real lender rule will fuel the rise of “rent-a-bank” programs, where a lender only partners with a bank to issue a loan in order to escape interest rate caps, then terminate the partnership after taking possession of the loan. The OCC cracked down on bank leasing programs during the 2000s, but critics of the True Lender Rule say it will create more opportunities for them to thrive in a growing online lending landscape.

“While some of today’s programs may be a bit more sophisticated with the fintech aura than the old programs, they still have the same escape from bank leasing,” said Lisa Stifler, director of policy at the State at the Center for Responsible Lending. .

“The loans that we see are always extremely expensive and extremely predatory. “

Democrats have lobbied for years to eliminate most high-cost, short-interest loans. The Consumer Financial Protection Bureau (CFPB) proposed in 2017 a rule that would effectively ban most “payday” loans, but the measure was overturned when a person appointed by Trump took over the office after the former resigned. director of the CFPB. Richard CordrayRichard Adams CordrayBiden Administration Reverses Trump-Era Policy That Hindered Investigations Of Student Loan Companies On The Money: IRS To Begin Monthly Child Tax Credit Payments July 15 | A quarter of Americans suffered financial blows in 2020: Supporters of Fed student debt cancellation encouraged by Biden, others remain skeptical MORE (RE).

Democratic lawmakers have also called for setting a federal interest rate cap at 36%, but those measures are unlikely to reach a Senate at 50-50. And while some Republicans have supported tighter loan protections, the vast majority say such limits are “condescending” and inappropriate.

“Does the idea that we should deny people access to loans because they can’t be trusted to make a good decision for themselves, does that sound a little patronizing and patronizing to you? »Asked the senator Pat ToomeyPatrick (Pat) Joseph ToomeyWatch Live: GOP Senators Introduce New Infrastructure Proposal Sasse Rebuilt By Nebraska Republican Party For Impeachment Vote Philly GOP Censorship Commissioner: “I would suggest they censor Republican elected officials who lie “MORE (Pa.), Republican ranking on the Senate Banking Committee.

Updated at 2:51 p.m.

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